On Thursday, July 2nd, the A-share market experienced a significant downturn, with technology stocks leading the decline. The ChiNext Index fell by 5.71%, the STAR 50 Index dropped 7.7%, and the Shanghai Composite Index closed 2.03% lower at 4,028.9 points. Full-market turnover was 3.47 trillion yuan, showing a slight decrease from the previous session. Hong Kong stocks saw initial gains before retreating, ultimately stabilizing, with the Hang Seng Index closing up 0.76% and the Hang Seng Tech Index edging down 0.4%.
In terms of market performance, previously popular themes were all in the red, with hard technology stocks bearing the brunt of the sell-off. The STAR Market Chip ETF HuaBao (589190), which has a full-chip industry layout, saw its on-market price drop by 8.72%. The Hong Kong Stock Connect Information Technology ETF HuaBao (159131), focused on Hong Kong-listed chips, fell 7.08%.
Optical module stocks experienced a broad-based decline. Tianfu Communication dropped over 12%, XYS slumped more than 11%, and Zhongji Innolight fell over 6%. The ChiNext Artificial Intelligence ETF HuaBao (159363), which has significant exposure to optical modules and CPO, closed down 7.42% on-market. Despite fierce battles between bulls and bears, buying power prevailed, resulting in a net subscription of 132 million units for the day.
Cao Xuchen, fund manager of the ChiNext Artificial Intelligence ETF HuaBao (159363), pointed out that news of Meta's plan to rent out computing power has caused significant shockwaves across the global AI industry chain. However, the essence of the current market volatility may be deleveraging. He suggested focusing on two upcoming time points: fundamentally, the quarterly reports of cloud providers from July 28th to 30th will verify demand and capital expenditure trends; sentiment-wise, the listing of SK Hynix ADRs on July 10th could serve as a catalyst for market anticipation.
As market risk appetite shifted abruptly, funds swiftly rotated into high-dividend assets. The large-cap Bank ETF HuaBao (512800), with assets exceeding 10 billion yuan, defied the market downturn to close up 1.49%, with daily turnover hitting 1.748 billion yuan, a yearly high. Defensive sectors such as agriculture, animal husbandry, fisheries, and innovative drugs also showed strength. Following surges of over 5% yesterday, the Agriculture, Animal Husbandry & Fisheries ETF HuaBao (159275) and the Pharmaceutical ETF HuaBao (562050) rose another 0.8%.
Oversold sectors in Hong Kong, namely innovative drugs and internet stocks, rebounded sharply today with strong upward momentum. The Hong Kong Stock Connect Innovative Drug ETF HuaBao (520880), which invests 100% in innovative drug R&D companies, and the Hong Kong Internet ETF HuaBao (513770), heavily weighted in internet leaders, both surged over 5% intraday, ultimately closing up 3.7% and 2.8%, respectively.
Some institutions have suggested that during periods of technology sector volatility, innovative drugs may be the preferred sector for capital rotation. The Hong Kong Stock Connect innovative drug sector may offer more substantial opportunities, as the current tech bull market is essentially a global one. Once it enters a consolidation phase, foreign capital from markets like Japan and South Korea returning to Hong Kong stocks is likely to favor innovative drugs as a primary allocation.
Focus on Key Theme Sectors
The following sections discuss the trading and fundamental situations of several thematic sectors, including Hong Kong Stock Connect innovative drugs, Hong Kong internet, and ChiNext artificial intelligence.
Hong Kong Stock Connect Innovative Drugs Surge Again
On the first trading day of July in Hong Kong, the pharmaceutical sector erupted again, with innovative drugs leading the market. The Hong Kong Stock Connect Innovative Drug ETF HuaBao (520880), a pure-play on innovative drug R&D, touched an intraday high of 5.43%. The Hong Kong Stock Connect Healthcare ETF HuaBao (159137), with over 45% exposure to CXO, climbed as much as 3.65%.
Focusing on Hong Kong Stock Connect innovative drugs, the sector opened strongly, with over ten stocks including InnoCare Pharma-B, Junshi Biosciences, and 3SBio rising more than 10%. Gains moderated in the afternoon but still significantly outperformed the broader market. Key heavyweight CSPC Pharmaceutical Group closed up 8.32%, while Innovent Biologics, Akeso, and 3SBio all rose over 7%.
The Hong Kong Stock Connect Innovative Drug ETF HuaBao (520880) closed up 3.7% on heavy volume, with daily turnover reaching 905 million yuan, a three-month high and a 95% surge from the previous day. Fund manager Feng Chencheng had previously indicated that from a medium-term perspective, innovative drugs at current price levels may possess significant upside potential.
The Hong Kong pharmaceutical sector has seen two major surges in the last three trading days, with Hong Kong Stock Connect innovative drugs showing particularly strong momentum. What signals does this breakout from a low base on high volume release? Some analysts believe a multi-factor fundamental resonance may be signaling the start of a bottoming and recovery trend for the innovative drug sector. The window for value re-rating of core Hong Kong Stock Connect innovative drug leaders may have arrived, with ample room for valuation upward revision.
On the news front, recent positive developments for innovative drugs have been frequent and powerful. Policy-wise, the dual-catalog negotiation involving "medical insurance + commercial insurance" has entered a substantive推进 stage, with new mechanisms like pre-declaration and 8-year price protection同步落地, further完善 the innovative drug payment system. On the industry side, as of June 26th, 166 A/H-share listed pharmaceutical companies have implemented share buybacks this year,累计金额 reaching 13.345 billion yuan. Entering July, mid-year earnings reports are also expected to serve as an important catalyst.
Positive overseas momentum has also contributed. Despite persistent market concerns about growth sectors being suppressed by expectations of Federal Reserve rate hikes, the XBI Index, a global bellwether for innovative drugs, has shown独立强势 performance, surging 20% over the past three weeks and over 80% in its最大涨幅 over the past 12 months.
From a market trading perspective, some securities firms argue that Hong Kong Stock Connect innovative drugs may present substantial opportunities for two main reasons. First, the overall quality of companies in the Hong Kong Stock Connect innovative drug segment is excellent. Second, the current technology bull market is essentially a global one. Once it shifts into consolidation, foreign capital from markets like Japan and South Korea returning to Hong Kong stocks is likely to favor innovative drugs as a primary allocation.
To capture the rebound opportunity in Hong Kong Stock Connect healthcare, investors can关注 two T+0 instruments: For pure-play innovative drug exposure, consider the Hong Kong Stock Connect Innovative Drug ETF HuaBao (520880), which excludes CXO and allocates 100% to innovative drug R&D companies, with over 70% of its portfolio in innovative drug leaders. For exposure to the innovative drug industry chain (including CXO), consider the Hong Kong Stock Connect Healthcare ETF HuaBao (159137), with "CXO content" exceeding 45%, while also covering leaders in innovative drugs, AI healthcare, and medical devices (including brain-computer interfaces).
Oversold Rebound in Hong Kong Internet
Hong Kong internet stocks showed逆市 strength, with leading权重 stocks collectively rising. Xiaomi Group-W gained over 4%, while Meituan-W and Kuaishou-W surged over 7% intraday, closing up 3.4% and 2.5%, respectively. Alibaba-W rose nearly 2%. The Hong Kong Internet ETF HuaBao (513770), heavily weighted in internet leaders, saw its on-market price一度冲高 over 5%, closing up 2.8% and reclaiming its 10-day moving average.
The sector's strong performance可能是多重利好共振的结果. On liquidity, overnight U.S. data on small business employment and manufacturing PMI showed signs of cooling in the U.S. economy, reducing market expectations for Fed rate hikes. A strong rally in U.S. internet leader Meta also provided positive映射. Policy-wise, the Beijing Municipal Market Supervision Bureau recently took the lead nationally in establishing a platform economy consultation mechanism aimed at fostering healthy competition, reaching multiple consensuses on optimizing subsidies. Platforms are encouraged to conduct promotional activities reasonably through measures like合理配置 subsidy funds,科学设置 order discount上限, and规范 non-rational large subsidies.
On the industrial front, internet leaders' AI strategies have reached milestone进展. Meituan recently officially released and open-sourced its new-generation foundational large language model LongCat-2.0, with a total parameter count of 1.6 trillion, becoming the first large language model in China to complete the entire pre-training and inference process on a国产算力卡 cluster of 50,000 cards. Additionally, Kuaishou's AI subsidiary, Kling AI, is即将完成 a new round of financing totaling $3 billion with Tencent participating. Post-financing, Kling AI's valuation is expected to reach $18 billion.
Some research institutions point out that the current global AI industry trend is正向扩散 towards the application端 and platform-side with入口 value. Internet platforms possess billions of user入口,海量多模态 data assets, and complete ecosystem industry chains including cloud and payment, making them core scenarios for AI commercialization. Market expectations are that major internet companies will successively ramp up efforts in AI commercialization, and the path to achieving commercialization依托 platform scenarios is值得期待. The sector's valuation logic有望迎来 a re-rating based on the value of AI application入口.
Currently, the Hong Kong internet sector's valuation is at a历史底部区间, with a P/E ratio of approximately 17.69 times, sitting at the 0.7th percentile of the past decade, indicating the sector's bottom is基本确立. Global markets have shown a clear trend of capital rotation from high to low valuations, with short-covering effects becoming prominent. U.S. software-related sectors like IGV have already rebounded about 30 percentage points from their lows. The market narrative is shifting from "AI受损方" to AI empowering and enhancing industrial competitiveness. Under the映射 of U.S. stock performance, the Hong Kong internet sector has potential for valuation修复.
Investors can关注 the value re-rating of Hong Kong internet leaders amid the AI transformation. The Hong Kong Internet ETF HuaBao (513770) and its feeder funds passively track the CSI Hong Kong Stock Connect Internet Index. Its top ten holdings汇聚 tech giants like Alibaba-W and Tencent Holdings, as well as AI application companies across various fields, offering significant龙头优势 and good日内 T+0 trading liquidity.
For those看好港股科技 but seeking to降低波动, they can also consider the first-of-its-kind Hong Kong Large Cap 30 ETF HuaBao (520560), which employs a "tech + dividend" barbell strategy. Its portfolio includes both high-beta tech stocks like Alibaba and稳健 high-dividend stocks from banking and insurance, making it an ideal long-term core holding tool for Hong Kong market exposure.
AI Hardware Plunge Triggered by Meta News
Influenced by a flash crash in overseas tech stocks, A-share hard tech sectors普遍大跌 today. Optical modules suffered deeper losses, with Changxin Borch and Tianfu Communication falling over 12%, XYS and Liantek declining more than 11%, and Zhongji Innolight dropping over 6%.
Among popular ETFs, the ChiNext Artificial Intelligence ETF HuaBao (159363), which focuses on optical modules and CPO, trended lower throughout the day, closing down 7.42% on-market and falling below its 20-day moving average. Despite intense多空交锋, buying power gained the upper hand amid the volatility, with单日资金净申购 reaching 132 million units, highlighting积极的看多 sentiment towards the future行情 of AI computing power and CPO.
What happened? Reports indicate that Meta is building a new cloud computing business that could help recoup the tens of billions of dollars it has invested in AI infrastructure. How should one interpret Meta's potential move into cloud infrastructure? At what stage is the current market行情, and what is the outlook? Cao Xuchen, fund manager of the ChiNext Artificial Intelligence ETF HuaBao (159363), provided a timely analysis.
Cao Xuchen stated that the market's担忧的逻辑链 of "renting computing power → abandoning models → computing power过剩 → capital expenditure下修" is not成立. This move is actually an asset optimization strategy that can address质疑 about cash burn while generating new revenue and improving resource efficiency. Lacking a cloud business基础, with a偏长回报周期 for GenAI, and facing massive capital expenditures of $135 billion in 2026 (nearly doubling year-over-year), expanding into cloud services can help平滑 the回报周期, similar in logic to xAI selling computing power to Anthropic.
The essence of the current market波动 may be deleveraging. Overseas, the strategy of "long hardware, short Magnificent 7" has seen高度集中头寸, with retail funds大量 migrating from leveraged long positions in SK Hynix to leveraged long positions in SanDisk, reflecting过度贪婪情绪 that亟需去杠杆 for筹码再平衡. In the A-share market, leverage pressure is concentrated in the semiconductor equipment sector, which is crowded with retail trading, and with the临近上市 of ChangXin Memory, risks may持续累积.
Two upcoming time points值得重点关注: fundamentally, the quarterly reports of cloud providers from July 28th to 30th will verify demand and capital expenditure trends; sentiment-wise, the listing of SK Hynix ADRs on July 10th could become a catalyst for market提前反应. Regarding配置 for ChiNext artificial intelligence, Cao Xuchen suggested逢低关注,优先选择 large-cap, fundamentally solid core leaders, with the核心考量 being to增强 holding耐心, which may lead to higher胜率 in the next轮行情.
The ChiNext Artificial Intelligence ETF HuaBao (159363) and its场外联接 funds focus on optical module and CPO leaders, with its underlying index having approximately 40% exposure to Zhongji Innolight, XYS, and Tianfu Communication, making it a core旗手 for AI computing power. Furthermore, the ChiNext Artificial Intelligence ETF HuaBao (159363) has a latest规模 exceeding 7.6 billion yuan, with an近6个月日均成交 over 900 million yuan,领先同标的指数 ETFs in both规模 and流动性.
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